Risk Neutral Expected Utility Computations

This module includes elements evaluating adherence to a linear utility function when computing expected utilities, delving into the behavioral patterns exhibited by individuals and institutions in their approach to risk.

Elements

1. 2.4.aCompute Expected Utility

   The ability to correctly compute the sum of the products of each outcome's utility and its probability.

2. 2.4.bMaximize Expected Utility

   The ability to select the prospect with the highest expected utility.

3. 2.4.cAvoidance of Risk-Averse Behavior covered

   The ability to make decisions based on an objective evaluation of all potential outcomes without over-valuing more certain payoffs.

   Covered by Maximize Expected Utility, which tests the same behaviour.

4. 2.4.dAvoidance of Risk-Seeking Behavior covered

   The ability to make decisions based on an objective evaluation of all potential outcomes without over-valuing rare high-reward outcomes.

   Covered by Maximize Expected Utility, which tests the same behaviour.

5. 2.4.eAvoidance of Loss Averse Behavior

   The ability to make decisions based on an objective evaluation of all potential outcomes without over-valuing potential losses.